Updated on: July 01, 2025
Making Sense of Scope 2: Location Based vs Market Based
If your company has started measuring its carbon footprint, chances are you've encountered the term 'Scope 2 emissions.' On the surface, it sounds simple, emissions from your electricity use. But once you get into the details it becomes clear that Scope 2 accounting is anything but straightforward.
Scope 2 emissions are often among the largest contributors to a company’s carbon footprint and are also one of the easiest to reduce through energy efficiency and renewable energy procurement. Recognizing this, the GHG Protocol introduced an updated guidance in 2015 requiring companies to report Scope 2 emissions using two methods: the location-based and the market-based approach.
As regulations, customer expectations, and investor disclosures evolve in India, understanding how to apply both methods is critical for accurate reporting and informed decision-making.
In this article, we will break down what these two methods mean, why they exist, and common mistakes we have seen in Scope 2 footprint calculation and reporting.
Why is there a Requirement for Dual Reporting ?
Before 2015, companies had no clear standard for how to treat renewable energy in their electricity mix. Some would subtract RECs (Renewable Energy Certificates), others wouldn’t. There was no consistent way to compare companies or track progress.
Dual reporting was introduced to solve this. It gives two views of your electricity emissions:
Both numbers are required. Together, they tell the full story.
Location Based Accounting
Location-based accounting reflects the emissions from the electricity physically supplied to a company’s operations. In most cases, this refers to electricity drawn from the national grid, where emissions are calculated using the average emission intensity for the country, as published by India’s Central Electricity Authority (CEA).When it comes to renewable energy, only sources that are directly connected to the facility such as rooftop solar or electricity supplied through a dedicated private line are counted in location-based reporting. T However, most other forms of renewable energy procurement, including RECs or open access power routed through the grid, are not reflected in location-based totals. That’s because this method is designed to show the actual carbon intensity of the electricity used, without considering contractual or market-based arrangements.
Reporting a location-based total is essential for understanding the physical emissions associated with business operations. But when companies set clean energy targets, especially under global commitments like RE100, they usually rely on the market-based method, which accounts for renewable energy purchases and offers more flexibility in how targets are met.
Market Based Accounting
Market-based accounting reflects the emissions associated with a company’s electricity purchasing decisions. It takes into account the contractual instruments a company uses to source electricity, especially when procuring renewable energy.
These instruments allow companies to claim the environmental benefits of clean energy even if the electricity is delivered through the common grid. What matters here is not the physical flow of electricity, but the legal ownership of the renewable attribute.
In cases where a company does not use any contractual instruments, it must still account for emissions in its market-based total, and it will be the same as location based total as there are no residual mix factors available for India.
Examples of contractual instruments in India include:
In India, because regulatory structures and access to renewable options vary by state, it's essential to review the quality and documentation of each contract to determine whether it qualifies under the GHG Protocol.
Market-based accounting is particularly useful for companies setting renewable energy or net zero targets. It gives them the flexibility to source clean power through different mechanisms, even when physical delivery isn’t possible, and still reflect meaningful progress in their emissions reporting.
Common Mistakes while Reporting
While working with companies across sectors in India, we’ve observedsome mistakes that compromise the accuracy and credibility of Scope 2 reporting:
Klimates is built to reflect real-world energy procurement in India, from grid electricity and rooftop solar to open access and RECs. Our calculation engine handles dual reporting, flags inconsistencies, and helps companies confidently report Scope 2 emissions in line with GHG Protocol and BRSR expectations.
Book a demo to find out how you can easily measure your scope 2 emissions.
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